CA AG Busts Another Ponzi Scheme. Yeah!

And the beat goes on -
or maybe I should say the beatings continue. Always good to see
miscreants get their come-uppance. Unfortunately for more than a
thousand people the come-uppance comes up too late to save their
'investment' and, in some cases, their retirement.

In this case we have
rich white dudes taking advantage of other (formerly) rich folks in a
scheme that is pretty sophisticated. Of course if it's going to be
based out of Irvine and the perps live in Coto de Caza you know it's
going to be an upscale scam. No use wasting that opportunity just to
scam a few million when your are surrounded by 'fat mooches'. This
caliber investor would be less likely to be suckered in by a two-bit
scam so you tailor the scam to the client and -viola - $52 million to
spend on vacations, Beemers, airplanes, etc. Hey, if you're going to go
- go large eh?

Hopefully they'll be
going large for the next decade in the Greybars Hotel & Spa
with a close companion named Bubba.

ORANGE COUNTY – Attorney General Edmund G. Brown Jr.
yesterday filed 89 criminal charges against 6 men who
“callously conned” more than a thousand people,
including retired senior citizens, out of $52 million through sham real
estate projects, using the investors’ money to buy planes,
expensive cars and lavish vacations.

“These six men callously conned hundreds of people into
investing $52 million into a company that they treated as their
personal bank account,” Attorney General Brown said.
“They fraudulently took investors’ money and spent
it on an array of luxury items, relying on a Ponzi scheme to keep
investors at bay.”

From 2001 to February 2006, Irvine-based Carolina Development Company
peddled $52 million worth of stock to more than a thousand investors.
The company claimed the proceeds would be used to buy and develop
luxury resorts and upscale communities adjacent to golf courses
designed by Arnold Palmer, Jack Nicklaus, and Greg Norman. Investors
bought anywhere from $15,000 to $1 million in stock, including senior
citizens who invested their retirement funds. The company bought some
land, but did nothing to develop it, despite its claim that 85% of the
$52 million invested would be used for land acquisition and
development.

To persuade investors to buy shares of Carolina Development Company,
the defendants claimed that Arnold Palmer had partnered with them. The
defendants promised that investors would reap huge dividends and
assured those who invested a minimum of $100,000 that their investment
would be secured by deeds to specific parcels of land. None of these
claims were true.

The defendants diverted more than $24 million for extravagant bonuses,
personal medical bills, airplanes, fancy meals, BMWs, concert tickets
and luxury vacations. To keep investors at bay, the defendants engaged
in a Ponzi scheme, paying some investors “returns”
on their investment using money from the new investors.

Department of Justice agents served arrest warrants against the
following six defendants, who were charged with grand theft and
securities fraud in Orange County Superior Court:

Lambert Vander Tuig, 50, of Santa Margarita, currently held in the
Orange County Sheriff’s Department.

Jonathan Carman, 45, of Laguna Hills, currently held in the Orange
County Sheriff’s Department.

Mark Sostak, 50, of Ladera Ranch, currently held in the Orange County
Sheriff’s Department. Bail is set at $4.5 million.

Scott Yard, 47, of Costa Mesa, remains at large.

Soren Svendsen, 43, of Coto De Caza, is currently being held in the
Orange County Sheriff’s Department. Bail is set at $2.2
million.

These criminal charges were preceded by civil actions brought by the
U.S. Securities and Exchange Commission (SEC). The SEC in 2007 won a
$29.2 million judgment against Lambert Vander Tuig, the president of
the company, and a $2.1 million judgment against Jonathan Carman, vice
president of the company.

If convicted, defendants Vander Tuig and Carman could receive sentences
in excess of 10 years in state prison. The remaining defendants would
be subject to lesser prison sentences.

I am glad to see the government really taking some action now. Unfortunately it is too late for the investors. I would love to see some action now on fradulant mortgage brokers and their associates. There are particular ones that I know of that have pulled scams on customers for years, by having their own appraisers go in and under appraise properties and take the customers for a ride on deposits and fees. I know because my husband was a victim of this about 2 years ago. His appraisal fees started out at 1600, then went to 1800, then to 2200, 2400 and finally 3400. He had already sunk 2800 when the appraisal was done, and it came back at only 195000. When he had purchased the place about a year earlier it was appraised at 250000. He could not get this new company to answer him, nor the brokerage. Two weeks later he got a new appraisal for 1800 and it came back 325000. Wow, land prices changed that fast, NOT!! Hes been to the BBB, done mediation and still never heard back from anyone from either company. Needless to say, they still operate today.

I hate that the investors for these scam artists have lost their life savings, but hopefully something will be put in place to stop this from ever happening again. How hard is it to set up a small task force to oversee these so called "new finance company ventures" and those who are running them?

I would love to see people like this be stripped of everything and left behind bars!

Thanks for the post Gene. Charging these people should put an end to the ponzi scheme but bringing them to justice, getting a conviction, and recovering all that remains of the funds invested by their victims will take a lot more work. I hope these crooks spend a long long time in jail.

Hi Gene, I don't know how arrogant you have to be to think that such a scheme won't catch up to you sooner or later. Unfortunately, it usually does so later, after a number of people have lost their savings. I like your tag line - we can be at least a part of the solution, if the public will let us.

I think Keahi said it best. If it is too good to be true....I think if the penalties were stiffer for crimes of this nature maybe they wouldn't be so abundant. It makes me so angry, the things that people get away with and barely a slap on the wrist it seems sometimes.

You know... these are all small potatoes. There is another Ponzi scheme going right now that is 70 years old, and is on the hook for TRILLIONS of dollars. It will collapse in just a few years. A lot of people call it Social Security.

Lane: Well said. There seems to be a lot of this going around. Some people call them bubbles, other people call them Ponzi Schemes, and others call them banks. I'm not sure exactly where the line is drawn between all of them.

Lane - That is an absolutely correct assessment of that institution and defines what a Ponzi is by paying off yesterdays investors with today and tomorrows investors. Of course if you're the government you don't refer to it as a Ponzi nor do you refer to the money you mint to cover your losses as counterfeiting. There are perks to being a government.

Bob - That is the heart of the problem. First of all our overburdened law enforcement personnel have to catch them. Our own DA has told us how tough it is because these crimes are all so different and so sophisticated it's not like finding a drug dealer or murderer - those are simple. Then assuming they do catch them before the perps skeedaddle, there is a loooong prosecution phase with loads of time and money being spent by the prosecutor to try to convince a jury something wrong actually happened. Finally, if they do get a conviction the sentences are almost laughably light. If they get 10 years, they'll be out in 1 /3 that time at most. And it's damn difficult to recover assets that have already been spent or squirreled away so these guys are back on the streets in a couple years still living large and ready to pull the same trick in a new area. The odds are in their favor

That's why it's so critical for Realtors to be on the front line of defense against this stuff and call it out when we see it and workl with our law enforcement torecognize it. 20 of you read this today and are better informed than we were yesterday. That's progress. Thanks.

Lenn - Love that line. I've been using a similar one for years - a sucker born every minute and 10 grifters born to fleece him. same concept - same result. Some people are just born victims, others just take a little convincing. After all, right now there are only two kinds of real estate market, those where fraud schemes have flourished and those where it soon will.

The schemes continue to increase through the tough times. We just lost a realtor in town with a guaranteed return program on buying lease properties. And we wonder why socialists are sick of capitalism.

Arrgggh! I hate hearing more stories like this. It only deteriorates American's confidence in our economic system. But at heart we're all to blame. We as a society need to get out of the get rich quick mentality. The old adage, "if sounds too good to be true it probably is" needs to be screamed from the mountain tops. And people like these guys, Bernie Madoff, John Thain, and numerous others need to be locked up for a VERY long time. In my opinion they are far worse than the two bit burglar that holds up a convenience store. That burglar only affects one person. These white collar criminals affects hundreds, sometimes thousands of peoples lives. And they erode the foundation of our economy. Thank you for the post and best of luck in 2009.

50% a month...come on...if it is too good to be true then it simply is too good to be true. I'm glad to see that these guys are stopped, but the preying on ethnic groups by their own kind is a real problem that I've seen happen over and over again. This is a real problem that needs attention.

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